THE GOLD STANDARD.

King Country Chronicle, Volume XXV, Issue 3371, 29 September 1931, Page 4

THE GOLD STANDARD.

The full effects of Great Britain's policy in suspending the gold standard is hard to prophesy. The financial experts of the world refuse to give a decided opinion on the matter, and only time will prove whether the change will be beneficial to trade or otherwise. Since the policy was announced there has been a general increase in business in Great Britain, and a more confident feeling on the Stock Exchanges, but whether this confidence in business will be further increased, or even maintained, is only a matter of conjecture at present. There is no question of the solvency of Great Britain. She has been placed in the same position as a bank with assets in plenty, but with the depositors demanding their money at short notice. This panicky feeling on the part of foreigners with money invested in Great Britain is due to several reasons, amongst them being the heavy adverse trade balance, exaggerated reports of the strike of j men of the Atlantic Fleet, and the huge sums that have been expended on social services throughout the country. Under the gold standard foreigner investors had the right to withdraw their investments in gold, and when the rush for realisation of these investments took place, Great Britain had not the gold available, even though she was owed more than she was owing. Then the Government stepped in and suspended the gold standard, with the result that foreign investors had to take their money in depreciated currency. The country could not afford to have its gold reserves completely drained dry, and the suspension of the gold standard was the only course left. With this suspension it was inevitable that the pound sterling would de-

preciate, but the same has happened before and recovered, and the pound sterling will recover again. It will now take pounds more to purchase a given quantity of goods from other countries than before. The Domin-1 ions, with the exception of South Africa, which is adhering to the gold standard, should benefit by the changes for their currencies are on the same basis as that of Great Britain. In other words, the exchange will mean a heavy tax on goods (imported into Great Britain fjrom foreign countries. This should lead to a bigger demand for raw materials j and foodstuffs from the Dominions.

France and Germany have inflated their currencies, but it is not expected that the pound sterling will ever reach the low level of the franc and the mark. In the case of these two countries their deflation policies did not have a lasting effect on wo<rld finance. With the fall in the pound sterling, however, every country in the world is seriously perturbed, and this must be looked upon as attribute to Great Britain's tremendous influence on world finance and trade. Already banking circles in France are showing alarm, and it is significant that the President of the United States has invited the Prime Minister of France to an early conference. The depreciated pound means a surcharge of anything from 15 to 20 per cent, on American goods imported into Great Britain. As France and the United States, through their concentration of gold, have largely been responsible for the chaotic conditions in world finance and trade, the new policy of Great Britain may bringboth to a realisation of their selfish

and uneconomic principles. One of j the members of the Macmillan Committee, the Hon. R. H. Brand, in an addendum to the report, made use of these words: "If it were possible to wipe out the Reparations and InterAllied debt payments, by far the greatest single step would, in my opinion, have been taken towards the recovery of world prosperity. Indeed until some fresh settlement of this problem, rendered necessary by the great fall in prices, is made, I do not believe that we can expect any recovery." This view is gaining ground. The gold standard is not at fault, but when two countries store up the gold coming to them instead of using it to purchase imports and helping other countries by loans, there is no doubt as to the reason for the present financial chaos and general depression in trade.